Where have all the FHBs gone?

by Julia Corderoy29 Jan 2015
First home buyers are disappearing. According to official figures, the number of loans to first home buyers decreased by 12% in the year to November 2014,  by 24% in the last two years and by 39% in the last three. While the blame has predominately been directed at investors or the dizzying house price growth, a new report suggests there may just be no incentive for first home buyers anymore.

The report – compiled by Savills Research – investigates the link between government incentive schemes and first home buyer activity in New South Wales, revealing that first home buyer grants may be behind the disappearing act.

“First home buyer activity, indexed to August 2004, indicates two distinct trends over the last 10 years,” the report states.

“The number of loans spiked at the beginning of 2009 driven by Government fiscal stimulus. However, demand fell as these schemes were wound back until the announcement of changes to the current scheme caused another spike in late 2011. Since then, first home buyer loan volumes have plummeted and are currently 41.7% lower over the last decade.”

The current First Home Owner Grant Scheme, responsible for the recent plummet in first home buyer loans, replaced the former grant scheme in October 2012. The $15,000 grant is only available for first home buyers who purchase a newly built home or plan to build their own home – in a bid to encourage residential construction. It will reduce to $10,000 from 1 January 2016.

Meanwhile, the average loan value for first home buyers has increased by 27.1% since September 2004, indicating strong growth in the value of ‘off the plan’ and newly built homes. So, regardless of the recent moderation in house price growth and slowdown in investor lending, it doesn’t look like first home buyers are going to re-enter the market anytime soon.